Wednesday, February 20, 2013

The Evil Bastard Krugman

Substance aside — not that substance isn’t important — Austrian economics very much has the psychology of a cult. Its devotees believe that they have access to a truth that generations of mainstream economists have somehow failed to discern; they go wild at any suggestion that maybe they’re the ones who have an intellectual blind spot. And as with all cults, the failure of prophecy — in this case, the prophecy of soaring inflation from deficits and monetary expansion — only strengthens the determination of the faithful to uphold the faith.

It would be sort of funny if it weren’t for the fact that this cult has large influence within the GOP.

First, Austrian economics has about as much influence on thinking at the GOP as it does with Elizabeth Warren and Nancy Pelosi: Zero.

Krugman is either lying or is batshit dumb---and often I think both apply.

In declaring Keynesian economics vindicated I am, of course, at odds with conventional wisdom.

Third, Krugman creates a straw man, when arguing that all Austrian economists were calling for major price inflation at the start of Bernanke's money printing. Bob Murphy was, but I took a different position. In 2009, I wrote:

Murphy expects CPI(urban) to rise to at least 8% over the course of 2009. While I fully expect an upturn in inflation in '09 and inflation at all levels to hit double digit rates at some point in the future, I'm not sure that this will occur in 2009. Thus, to remain consistent in my total disagreement with Murphy, I am going to say that inflation in 2009 will not hit an annualized rate of 8% for any three month period or longer. Obviously, a one month jump of 1% would put inflation at a 12% annualized rate. This could happen, but I don't think in '09 we will see 8% annualized inflation over any three month period.

Here's exactly what occurred. Price inflation did pick up, as I expected, but it didn't get anywhere near Murphy's forecast:

But aside from this forecast, Krugman ignores the fact that Austrian economists tend to be leery of any numerical forecasts. We view the nature of economics differently than Krugman. It's not that we don't have suspicions about what might develop, but we know it is a complex world, and although there are macro factors that are entirely visible, the complexity of the world is such that we don't know all factors. This doesn't leave us blind. Austrians would never, for example, make the errors that Krugman did, when he declared Argentina and Brazil major success stories. See: Paul Krugman's Great Forecasting Failure: Argentina and Krugman Blows It On Brazil, Also. These are major embarrassing errors that, again, would never be made by even a neophyte Austrian.

It is indeed frustrating that after three years in which Keynesian predictions have been spectacularly correct, pundits insist on reading the evidence as a rejection of Keynes.

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I have often wondered why Keynes - unlike, say, Freud - has never become a pop cultural icon.

My real point here is not, as much, that Krugman is a cultist, but that when a person views an economist as seeing the world correctly, he is going to say, in many ways, many times, that such person is correct.

Krugman does it as much as the next guy. Krugman is being an evil bastard to pretend otherwise. The real test should be which economic theories are the soundest. When sound thinking is used as the criteria to look at different economic schools of thought, Austrian school economists Ludwig von Mises and Murray Rothbard have John Maynard Keynes blown away. Mises and Rothbard are much more careful in developing their theories and on a much sounder basis (no misunderstood babysitting coupon co-op stories at the foundation).

Krugman has demonstrated he doesn't understand economic basics such as Say's Law and the Broken Window Fallacy, so perhaps he should be forgiven for not understanding advanced Austrian concepts such as the regression theorem, the exhaustion of the reserve fund, praxeology in general, and Austrian business cycle theory.

But it is just childish to call out "cult," when one simply doesn't understand a science. Does anyone have any babysitting coupons left? There's a grown man throwing a child-like tantrum.

27 comments:

Just as his casual dismissal of "Say's Law", his declaration of Austrian economics as a "cult" is equally unimpressive.

There's no logic to it what so ever, it's simple name calling with no substance.

Of course, that appeals well to his base of 2nd hand dealers...who typically appeal to emotion over logic in stealing everyone's money...but such is a demagogue's life, which Krugman has just proved himself to be definitively.

Krugman cannot and does not mention even our basic concepts or analysis because those are so obviously true, obvious and rational that they must not be allowed to see the light of day. No Keyensian understands Austrian analysis and they are afraid to allow even a scintilla of that analysis into their cowering little minds.

Why go nuts over what he posts? So what. All one has to do to discredit much of mainstream economics is look at how f'd up the world is today following its concepts. Keynesianism? Really? How about Japan? Oops! MMT is wonderful for math lovers, but Christ it couldn't even see the 2008 crash coming! IMO, its mainstream economics that has the selling job to do, not AE.

What guys like Krugman don't realize is that mainstream economics may be no different than alchemy was some 400 years ago. If a modern chemist could travel back in time and present proof to the alchemist that their life time of theories are wrong, does anyone believe they would listen and say "you're right" or would they do what Krugman and others in academia do to people suggesting the "status quo" thinking is wrong and call them fools, close minded and frauds?

It takes an open mind and lots of critical thinking to question the status quo and yet it takes no thinking at all to accept it.

How right you are. The something from nothing mentality is very disconnected from the reality of scarce resources. Also, what seems like the real leap for Keynesians, is the Austrian understanding of human nature, that people are prone to weakness and that good things (like building wealth) take time; but as Shakespeare points out again and again, even good people will sell their principles for an easy (unearned) gain.

How right you are. The something from nothing mentality is very disconnected from the reality of scarce resources. Also, what seems like the real leap for Keynesians, is the Austrian understanding of human nature, that people are prone to weakness and that good things (like building wealth) take time; but as Shakespeare points out again and again, even good people will sell their principles for an easy (unearned) gain.

While Krugman would no doubt dismiss summarily a comparison of the dollar's purchasing power relative to gold over the past 100 years, it clearly shows the inflationary effects of massive deficit spending and monetary expansion. Decades ago someone predicted what we could expect from this sort of fiscal policy, and his name was not Keynes.

You're absolutely right, but it wouldn't surprise me if that discussion didn't quickly move into many people claiming that today's standard of living is higher today (free and mandatory schooling, flush toilets, etc.) than WAY back then, so purchasing power and a gold standard must not matter.For them, it's all emotion with no logic required.

So you'd rather live in 1913 compared to today, KHavlicek? And low and stable "price inflation" (cult alert!) is coming by design. You know it's the target, I know it's the target and we can make plans accordingly. You may not like it, most retirees would prefer "price deflation" (cult alert!). Most businesses who have borrowed think otherwise.

It's the variation of "price inflation" (cult alert!) which matters, not if the target is 2% or 0%. However, there is broad evidence that the 2% target is quite a bit "better" than the 0% target.

No but the gold bubble is bursting as we speak. Rather than gold getting to $3,500 it is today down almost 3% to $1,563. Funny, should that really be happening? How can you explain that away? Why isn't this discussed today but only some random statistics on housing are mentioned? The other day the main worry of many users here seemed to be what to do when gold reaches $3,500 and riots erupt in the street.

It looks like the worlds preeminent intellectual smear merchant is guilty of projecting his own psychological defects on others as a coping mechanism. Krugman really should get some therapy for his ego issues.

A lot of people believe Austrian economists have "access to truth that generations of mainstream economists have somehow failed to discern" because it's true. Mainstream economists didn't see the housing bubble or economic collapse while Austrian economists were warning about it long before with great accuracy. How else do you explain this disparity?

2) Also warning about it vaguely and "long before" isn't helpful either, the broken clock which is right twice a day or the boy who cries wolf come to mind.

3) Finally, an economic collapse hasn't happened, GDP is more than what it was before the crisis, a severe, even Great, recession, but no collapse. If you think it's still coming, see point 2. If you feel that it's somehow an issue of government malfeasance of measurement, see being a cult.

1. The more krugman mentions the Austrian school the better. It shows we can't be ignored. I like when krugman is frustrated. His frustration leads him to make absurd statements. Like it or not he is helping the Austrian school spread. Not everyone who reads his nonsense will believe it. Some with check out the Austrian school and align with us.

I hear this positivist talking point a lot, even from lots of folks who don't even know they are positivists. Austrian Econ is a cult because it believes in a priori concepts! It's not falsifiable! Hate to break it to you Krug, but if you buy that, then all mathematics must be thrown out, being based upon axioms.

Of course, the reason most of these goobers don't know they're being positivists is because the position is so obviously self contradictory -- how does one go about defining "falsifiability" without accepting at least one axiom (an a priori concept)?

Even if you ignore that point, requiring falsifiability of hypotheses makes ordinal values (like preferences, one of the fundamental economic concepts) impossible. How does one prove that one ordinal value is greater or less than another? One simply knows it by definition.

It's like these clowns have never even heard of Godel's theorems -- don't they know that given any axiomatic system there will always be at least one proposition which can be neither proven nor disproven? Considering their ignorant position, I wouldn't be surprised by this at all.

The ridiculousness of holding a position which is so trivially easy to prove false makes their accusations of "cultishness" rich. At least most religious beliefs cannot be conclusively proven to be false, unlike all this positivist pap.

Krugman basically walked into a bear-trap when he then went on to disparage the predictive capacity of Praxeological methods; had he any familiarity with Austrian school concepts, he would know that it was Mises who proved that it was impossible to acquire the requisite knowledge to make accurate macroeconomic forecasts (which is why centralized planning fails). As such, I am not impressed when he uses such as evidence for "cultishness", considering that praxeology does not allow the possibility of such economic "prophets".

Krugman's fans sure seem cultish when trying to explain away how wrong he was about the fed creating a housing bubble, his statements about argentina and brazil being run well, his statement that citizens don't need to own guns because we have cops, etc.

Krugman is still stuttering and stammering his chubby little cheeks away over the drubbing he took in his debate with Ron Paul. I still remember him advocating "barter" while claiming that austrians wanted to "take us back."

I love seeing the power of the northeastern establishment types like krugman slowly fading away while the internet is providing it to the austrians. His little tantrums are the best proof of all of this.

Inflation is in the double digits. I live in NYC, which is the modern day equivalent of Amsterdam during the 1500s-1600s. Consumer prices, in terms of the CPI, are up only in the low single digits - ONLY BECAUSE THEY EXCLUDE ENERGY, FOOD AND REAL ESTATE. NYC commercial real estate values are up 13% year-over-year, according to Bob Knakal, chairman of the firm that sells most of that real estate. I work for a bank, financing some of this real estate. Some rents are up in some neighborhoods, but so are taxes, operating expenses and insurance - NOI is FLAT. Values are up because cap rates are down. Cap rates follow interest rates. So, there is plenty of inflation - double digit inflation. Just not in the prices that the inflation-deniers choose to include in their measure.